Republic of Iraq

Emergency School Construction and Rehabilitation Project

                                    Redacted Report




                                                March 2018
                                Statement of Use and Limitations

This Report was prepared by the World Bank Group (the WBG) Integrity Vice Presidency (INT).
It provides the findings of an INT administrative inquiry (the Investigation) into allegations of
corrupt, fraudulent, collusive, and/or coercive practices, as defined by the WBG for purposes of
its own policies, rules and procedures (the WBG’s Framework regarding Anti-corruption), in
relation to the WBG-supported activities. The purpose of the Investigation was to allow the WBG
to determine if the WBG’s Framework regarding Anti-corruption has been violated.

This Report is being shared to ensure that its recipients are aware of the results of the INT
Investigation. However, in view of the specific and limited purpose of the Investigation underlying
this Report, this Report should not be used as the sole basis for initiating any administrative,
criminal, or civil proceedings. Moreover, this Report should not be cited or otherwise referred to
in the course of any investigation, in any investigation reports, or in any administrative, civil, or
criminal proceedings.

This Report is provided without prejudice to the privileges and immunities conferred on the
institutions comprising the WBG and their officers and employees by their respective constituent
documents and any other applicable sources of law. The WBG reserves the right to invoke its
privileges and immunities, including at any time during the course of an investigation or a
subsequent judicial, administrative or other proceeding pursued in connection with this matter.
The WBG’s privileges and immunities cannot be waived without the prior express written
authorization of the WBG.




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Background

The Emergency School Construction and Rehabilitation Project (the Project) in Iraq was designed
to support the Iraqi government in improving conditions for learning in primary and secondary
schools through the rehabilitation of schools in urgent need of major repair. The Project was
financed by an International Bank for Reconstruction and Development (IBRD) 1-administered
Trust Fund. The Iraqi Ministry of Education (MoE) was assigned general Project oversight
responsibilities. A core group of senior MoE staff and hired consultants constituted the Project
Management Team (PMT). Company A and Company B were each awarded a contract under the
Project. The Project closed in 2013.

Allegations

The World Bank Group Integrity Vice Presidency (INT) received an allegation that Company A
and Company B falsely claimed to have completed the work required under their respective
contracts.

Methodology

INT’s investigation consisted of, among other things, a review of Project documents, and
documents and statements obtained from Company A, Company B, and the PMT.

Findings

I. Company A

The MoE and Company A signed a contract for the rehabilitation of three schools—School 1,
School 2, and School 3—under the Project (Contract A).

    1. Certification of Completion of Work

Evidence indicates that about four months after signing Contract A, Company A reported that it
had completed its work under Contract A. Company A and the supervising engineer signed
itemized lists noting that all the requirements of Contract A had been met “according to
specifications. ” The PMT’s designated construction supervisor (Focal Point) and the
supervising engineer for each school also signed these lists.

Evidence indicates that in the following weeks, three other events occurred:
    •   The Focal Point signed an additional document stating that work had been completed,
        that “all works were implemented according to the specifications and in good timing,”
        and that “no problems existed” with the implementation.


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  The IBRD is one of the five institutions comprising the World Bank Group. The International Development
Association (IDA) and the IBRD constitute the World Bank. The IBRD and the World Bank are used interchangeably
throughout this Report.

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   •   A committee, appointed by the MoE and led by the Focal Point, issued initial acceptance
       certificates for all works.
   •   The Focal Point initiated and submitted change orders that increased the value of
       Contract A. These change orders were approved by Company A.

   2. Inspections of the Work Certified as Complete

   a. World Bank Inspection

World Bank staff conducted an inspection, and observed that the schools rehabilitated by
Company A were not completed as Company A and the Focal Point claimed in their initial
certification. Specifically, evidence indicates that World Bank staff observed that minor
discrepancies existed with School 1 and School 2; and that School 3 was missing some facilities,
while other “new” facilities were actually refurbished.

   b. PMT Inspection

Evidence indicates that based on these initial findings, the PMT office conducted a full review
of Contract A, and observed various items that were not implemented and/or constructed to
specification. The PMT office also noted that at School 1, some extra work had been done. In
response to the PMT inspection, the Focal Point submitted additional change orders that deducted
works not completed by Company A.

   c. School Construction Directorate Inspection

Evidence indicates that, subsequently, another inspection was conducted by a third-party
committee comprised of members of the MoE School Construction Directorate (SCD). A cover
letter signed by the PMT leader stated that the total value for works completed by Company
A was less than the value indicated in the underlying documents.

In an additional letter to the MoE, the SCD Director General noted that some of the completed
work was beyond what the PMT had requested. The Director General wrote that newly added
items were “implemented due to schools’ need for such works, and deleted items were removed
from bills of quantities after they were proved not needed in these schools. Changes were made
for the public interest.” The new items appeared to have had a total value of a certain amount.
However, this amount is less than the discrepancy between the value of Company A’s work
and the amount Company A was paid. It also was unclear whether the Director General
r e f e r r e d to items incorporated into Contract A by change orders, or items that had never been
made part of Contract A.

   d. Subsequent Change Order

Based on the SCD committee’s findings, the PMT Director, along with four other PMT staff,
submitted a further change order to bring the contract payments in line with the work completed.
However, evidence indicates that the change order submitted by the Focal Point still overstated
the value of Company A’s work.

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   3. Company A’s Explanation

During INT’s investigation, Company A told INT that it did not complete the list of services and
rehabilitation work set out in the initial contract. Company A informed INT that it was directed
by the Focal Point and school principals to not perform certain contracted tasks, and instead
perform work that the Focal Point and the school principals considered more important.
Company A admitted to INT that it cooperated with the schools’ requests for these variations.

Company A informed INT that it submitted invoices for incomplete works, in order to
compensate for other works that had been completed. Company A informed INT that it submitted
the invoices on the recommendation of the Focal Point, among others. Company A asserted that
it had provided “at least the total value of the contract, if not more.” However, Company A
failed to provide any supporting evidence for that assertion when requested to do so.

In support of Company A’s explanations, the Focal Point wrote to the World Bank, explaining
that s/he had requested some of the changes in the contract execution for technical reasons,
and to save time.

II. Company B

The MoE and Company B signed a contract for the rehabilitation of three schools—School 4,
School 5, and School 6—under the Project (Contract B).

   1. Certification of Completion of Work

Evidence indicates that about four months after the signing of Contract B, Company B reported
that it had completed its work under Contract B. Evidence indicates that in the following weeks,
three other events occurred:
   •   A committee, including PMT officials and a representative of Company B, signed a
       receiving report for each school certifying completion of work. It read, “ [ t ] he
       committee performed on- site probation and inspection and found that works were
       completed as per the technical conditions and specifications.”
   •   A committee, appointed by the MoE and led by the Focal Point, issued initial acceptance
       certificates for all works.
   •   Change orders were added to Contract B that increased its value.

   2. Inspections of the Work Certified as Complete

   a. World Bank Inspection

World Bank staff conducted an inspection and observed that in two of the three schools
rehabilitated by Company B (Schools 4 and 5), and found that Company B had not built
all the contracted -for facilities. As a result of these findings, the World Bank withheld
the disbursement of final payment to Company B.


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   b. PMT Inspection

Evidence indicates that a PMT-appointed committee, including the Focal Point, conducted an
inspection of Schools 4, 5, and 6. The PMT committee observed that at Schools 5 and 6 a variety
of contracted-for work was not completed. The PMT committee further observed that at
School 4, contrary to Contract B, Company B had refurbished facilities, rather than provide new
facilities; had not installed various fixtures; and not completed work.
In response to the PMT inspection, the Focal Point submitted additional change orders that
deducted works not completed by Company B.

   c. School Construction Directorate Inspection

Evidence indicates that the SCD inspection committee found that the total value of Company
B’s completed work amounted to a certain sum but it deducted an additional amount for
substandard work. This adjusted figure was less than the value Company B certified complete,
and less than the value of the contract after the above-mentioned change orders.

   d. Court-Appointed Audit Committee Inspection

Company B challenged the PMT office’s assessment in domestic court. The court appointed an
audit committee, which inspected Company B’s schools. Based on the audit committee's report,
the court made a valuation of Company B’s work.

The court’s final figure was established based on an item-by-item survey of works required b y
the contract and change orders. The audit report identified that various items were not
implemented, were partially incomplete, or were fully rejected due to substandard quality. The
court’s valuation was lower than the valuation that Company B certified as complete.

   3. Company B’s Explanation

Company B informed INT that it had completed the works on the schools as required by the
Focal Point and Contract B. However, Company B also admitted that despite the contract
requirements, i t repaired some items rather than replacing them. Company B informed INT
that it did so at the request of the Focal Point and school managers. In his/her written statement
to the World Bank, the Focal Point admitted to informally canceling certain contractually-
required work, in favor of items that s/he deemed more important.

Company B did not contest the accuracy of the PMT inspection, but disagreed with the
inspection's valuation of Company B’s work. Company B stated that it had performed
additional works requested by the Focal Point and one of the school’s principals.

Company B said that none of these on-site changes were documented, and that they were not
included in change orders. It is unclear from Company B’s explanation whether it meant that
the changes were never included in change orders, or that the changes were not incorporated in
change orders while the initial work was ongoing.



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Follow-Up Action by the World Bank

The World Bank Group imposed a sanction of debarment with conditional release on Companies
A and B, which extends to any legal entity directly or indirectly controlled by Company A or
Company B




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